Children's compensation claims: A consumer's perspective

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 changed the way personal injury and clinical negligence cases are funded. Conditional fee agreements (CFAs) no longer have success fees payable by the unsuccessful defendant. Instead, the successful claimant must pay these from their damages. Claimants are now consumers – the reforms deliberately gave them a very specific interest
in the costs being incurred on their behalf.

As most CFAs are sent out to the client for signature, it is essential that the client care information in use is fully compliant with the requirements of the relevant consumer protection legislation. Since 13 June 2014, this is the Consumer Contracts (Information Cancellation and Additional Charges) Regulations 2013 under the Consumer Protection Act 1987; it is anticipated that the current Consumer Rights Bill will come into force in October. If these provisions are not correctly followed, then the consumer/client can cancel the CFA without penalty up to a year after
it was made.

The Conditional Fee Agreement Order 2013 (made under the Courts and Legal Services Act 1990) is also relevant. Section 5(1)(a) limits the success fee that can be charged to 25 per cent
of general damages and past pecuniary losses. Second, as the order sets out how the success fee
is calculated, there is no need for a risk assessment to be prepared by the instructed solicitor. These provisions affect all such claims and it is relatively straightforward to standardise these requirements in the client care information which is sent out on each case.

Children’s compensation

The 6 April 2015 update to the Civil Procedure Rules (CPR) 1998 introduced changes to the evidence which needs to be presented at an infant approval hearing in order to justify the 25 per cent success fee being deducted from the child’s compensation. These requirements are set out
in the new CPR part 21 practice direction and appear to ignore the provisions of the CFA Order 2013 because they go directly to how the success fee has been calculated on each case.

Theoretically, infant or protected party cases should be dealt with similarly to other cases. However, the raison d’être of the infant approval hearing is to ensure that the most vulnerable members of society have judicial protection. That scrutiny was previously limited to ensuring that the amount of compensation was fair. It appears that the rules committee has decided that the judiciary must also satisfy themselves that lawyers are not taking too large a slice of the compensation claimants need to help them live with the effects
of their injuries.

Litigation friends

The mechanism by which the amended rules seek to achieve this is by requiring (a) the litigation friend to file a witness statement explaining their understanding of the consequences of the funding arrangement, and (b) disclosure of the advice which was given to the child’s litigation friend in order to persuade them to sign the CFA. The view that this was the only method of funding the claim is unlikely to be sufficient to persuade the judge to agree to deduct the full 25 per cent. It is necessary is to show that the risk to the child (rather then the litigation friend or the lawyers) justifies that deduction and this needs to be covered in the confidential written advice disclosed to the court.

Using the pre-Jackson ready reckoner
to calculate the success fee shows that a 25 per cent success fee is equivalent to the case having
an 80 per cent prospect of success. That is a useful guide as long as the prospects of the child winning the case before the CFA was signed were between 51 and 80 per cent. Accordingly, a clear letter of advice to the litigation friend tying this to the reason for setting the success fee at 25 per cent is
a useful piece of evidence.

Practice direction 21, paragraph 11.2 requires the litigation friend (not their solicitor) to make
a witness statement setting out the nature and amount of the expense and their reason for incurring it. They therefore need to be able to explain why they thought it reasonable to agree
to a funding arrangement which costs their child 25 per cent of the applicable damages on top
of the base costs their lawyer is recovering from
the unsuccessful defendant. Additionally, paragraph 11.3 requires the following evidence
to be disclosed to the judge hearing the approval application:

• A copy of the CFA signed by the litigation friend;

• The risk assessment calculating the success fee;

• The reasons why the funding method was actually selected for this client;

• The advice given to the litigation friend in respect of the funding arrangement;

• Details of any costs agreed or recovered or of any fixed costs recoverable by the child; and

• Confirmation of the amount to be deducted together with confirmation that it falls within the allowed definition of deductible damages.

Consumer perspective

From a PI/clinical negligence perspective, there are two fairly obvious issues with these requirements. First, the amended CPR part 21 itself does not clearly require this information to be disclosed. Second, the CFA Order 2013 removed the need to disclose the risk assessment. Advice given to the litigation friend is privileged and the success fee cap removes the need for a risk assessment. Other experienced commentators have suggested that this change is likely to be ultra vires.

On the other hand, part 21.12(4) has been updated to require the court to have regard
to the requirements of part 46.9. This permits
a reasonable success fee to be allowed where
the client agreed to it. However, in addition, part 46.9(4) says: ‘The court will have regard to all of the relevant factors as they reasonably appeared to the solicitor or counsel when the CFA was entered into or varied’.

This does leave some scope for submitting similar evidence covering all relevant factors.
Part 21 is the procedural manifestation of the court’s inherent parens patriae jurisdiction.
This duty to protect those who cannot protect themselves provides sufficient reason to try to make the best of the new requirements in practice. It is relatively easy to foresee a judge using it to support part 21 rather than going against it for the benefit of the lawyers.

The inherent jurisdiction supports the view that these changes make more sense when viewed from the point of view that they provide greater consumer protection than that given by the
CFA Order 2013. It may well be that the courts adopt a purposive approach to interpreting
the CFA Order 2013 and the CPR amendments which seems more in keeping with consumer
law than PI/ clinical negligence law or practice.

Guidance for practitioners

If so, then the emphasis practitioners ought to consider adopting is to prove that they gave the litigation friend precise advice and information which (a) allowed them to fully understand the implications of the funding agreement on offer, and (b) cannot be interpreted as disadvantaging the child.

Recent consumer law developments demonstrate that the courts feel obliged to adopt a purposive (and arguably invasive) analysis of the information provided to the client. District judges are used to hearing consumer law issues and, as these new rules currently apply only to claims worth under £25,000, they are most likely to be the ones hearing these applications. This is a summary assessment under the new part 21.12(1A)(b). The position is unlikely to be more favourable to cases worth more than £25,000 as these still seem to be subject to the need for a detailed assessment of the costs to be deducted, with the added cost, delay, and scrutiny that this brings.

Part 21.12(8) also requires that the inter partes costs are either agreed or assessed before the application can be made. Accordingly, it would seem that the final approval of the settlement cannot reasonably be separated from the final approval of the deduction for the success fee (which requires the judge to agree that a proportion those damages go to pay for legal
costs rather than to compensate the child for
those injuries).

To summarise, solicitors wishing to act on these cases will need to adapt to make it clear to the litigation friend that the success fee ought to reasonably be set at 25 per cent of the applicable damages. This advice needs to be able to stand up to judicial scrutiny. Without forgetting to focus on the facts of each case, the risk assessment is probably the central document with which to build the other documents around. There is no substitute for individual thought and experience here, but an updated risk assessment ought to remove those generalised risks which could be taken not to apply. 

 

Example On the basis that less is more, the following might be seen as a useful set of risks. These need to relate to the risk of the child losing the case. How do these increase the risk to the child rather than the litigation friend (LF)? Delete those risks which do not apply. 1. Breach of duty (a) Child’s version of events and presentation as a witness (specify); (b) LF’s version of events and presentation as a witness (specify); (c) Availability of medical records – ability to corroborate initial instructions; (d) How long ago was incident? Ability of key witnesses on both sides to recall details of accident/incident; (e) Is supporting witness evidence already available? If not, explain why it is not currently available with planned timescale for obtaining it; and (f) Other corroborating evidence available (e.g. photos/records of the incident, etc.) – ability to corroborate initial instructions. 2. Causation of damage (a) Specify the nature of the injury (both physical and psychiatric elements). How does any complexity affect the ability to prove that it was avoidable? (b) Are medical notes/records available – is it possible to verify whether a compensatable injury has been caused? (c) Are there relevant previous accidents/injuries/medical conditions? If yes, specify (including congenital/genetic/family history of similar illness). Are they likely to prevent the child being compensated? and (d) Are there any other issues which are likely to prevent the child having suffered an avoidable injury? If so, specify these. 3. Details of defendant(s) (a) Likelihood of tracing/are we in contact? (b) Are they insured? (c) If not insured, do we have information regarding assets or ability to enforce any judgment? The risk is that the child will have to abandon the case due to the defendant being a man of straw. (d) Is there more than one defendant? If yes, please specify. The risk of multiple defendants is that the child may obtain only a pyrrhic victory against one defendant, which might eat up their damages payment in paying the defendant’s costs. Set out how qualified one-way costs shifting affects this. 4. Other risk factors (a) Likelihood of failure to proceed; (b) Is the case technically difficult and/or involving novel legal/factual issues not covered above? If so, specify.  (c) Are there other relevant issues? If so, specify.  5. The success fee (a) What element of the success fee relates to delayed payment of basic fees and/or disbursements? Nil. (b) What element of the success fee relates to risks of litigating set out above? All. (c)Total prospects of success on the child obtaining an enforceable judgment (using the ready reckoner below): 50 to 100 per cent. (d) Total percentage success fee (using the ready reckoner below): 0 to 100 per cent. (e) The success fee is capped at 0 to 25 per cent of applicable damages.   Prospects of success (per cent) Success fee (per cent)     100 0 90 11 80 25 75 33.3 70 43 65 54 60 67 50 100

 

These amendments are challenging and do not immediately make sense to many practitioners. The 25 per cent success fee cap is a maximum which judges will seek to reduce to properly protect the child’s interests. Analysing the risk from the child’s perspective ought to reduce the risk of solicitors being seen to be unduly avaricious. SJ

Geoffrey Simpson-Scott is an associate at Colemans-ctts

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